Low Indian cotton prices, weak demand and increased sowing worry traders, industry

Economy


PUNE: Domestic cotton prices are 16% below the international rates and traders are worried that prices may come under further pressure due to weak demand and increased sowing this season.

Industry and trade associations allege that “excessively high” estimates made by the United States Agriculture Department (USDA) have increased pressure on Indian cotton prices.

“USDA, in its report, has shown carryover stock of 19 million US size bales as on July 31, 2020, which is equivalent to about 244 lakh Indian size bales of 170 kg each. If we reduce two months’ consumption by Indian mills for August and September 2020 from the said USDA stock, the carryover stock of Indian cotton works out to about 200 lakh bales as on September 30, 2020, as against 50 lakh bales estimated by the Cotton Corporation of India (CCI),” the Cotton Association of India (CAI) said in a recent release. “Cotton Advisory Board has also estimated carryover stock of Indian cotton as on September 30, 2020 at 48.41 lakh bales.”

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According to CAI, cotton is selling at Rs 35,000 per candy (of 356 kg each) in the Indian market while imported cotton is available for Rs 42,000 per candy.

“We are finding it tough to export cotton and cotton yarn due to wrong projection by USDA about Indian cotton carry-forward stocks. Indian cotton exporters and Indian spinning mills and garment manufacturers have to bear huge losses,” CAI president Atul Ganatra said. “The difference is very big between the estimate by USDA and the Cotton Advisory Board. So Like China, we want the government to look into the matter and ask USDA to take cotton production and cotton consumption and stock figures estimates from CAB.”

Ganatra said, “If figures are not corrected then in the coming new season we will see huge losses to Indian cotton growing farmers also.”

Industry body Southern India Mills Association (SIMA) too has objected to the USDA’s higher estimates. However, it has said that the difference between the closing-stock estimate of Indian industry and that of the USDA is of about 90 lakh bales to 100 lakh bales, as on September 30.

Ashwin Chandran, chairman of SIMA, said, “There is tremendous pressure on yarn price. The area sown under cotton is set to increase this year as the government has increased the support price. This will further increase cotton availability in the country. Hence, we have asked the prime minister to extend a special package for boosting cotton consumption in the country.”



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